Many home owners are being unfairly denied the most competitive rates by their
lender.

Linden Rowland was furious when his lender, Santander, told him that he couldn't move to a cheaper mortgage because he wouldn't be able to afford the repayments.

Mr Rowland, from Brighton, said: "I have never heard such nonsense. Effectively they were saying I couldn't afford to pay significantly less than I had been paying for the last 11 years."

The IT consultant found himself effectively a mortgage prisoner when he came to the end of his five-year fixed deal. He had been paying 5.8pc interest, giving a monthly repayment of about £830.

He was sure he would be able to cut his monthly bills by switching to a competitive package, not least because he had more than 50pc equity, had been with the bank for 11 years and had never missed a payment. There had been no change in his financial position.

So when he found himself on the bank's 4.74pc standard variable rate, he asked for one of its cheaper deals, only to be told that he no longer met the bank's affordability criteria.

"They told me I couldn't afford a cheaper loan, even though there had been no change in my financial or personal circumstances," he said.

Mr Rowland admitted that his income was not particularly high, as he works only as many hours as he needs to. He was not surprised when he contacted his bank, HSBC, and was told that he wouldn't meet their affordability tests either.

He said: "Remortgaging wasn't going to be an option. But Santander knows me better than anyone. They knew I had never had any difficulty meeting a mortgage repayment. I couldn't see why they were telling me I couldn't afford a loan I had had for 11 years."

The problem was solved when The Telegraph intervened and the bank immediately offered Mr Rowland a chance to switch to its cheapest mortgage rate, 2.49pc. This will allow Mr Rowland to nearly halve his repayments from around £679 to £356, although he will have to pay an arrangement fee of £974, which is being added to his loan.

"I couldn't be more happy with the outcome," he said.

A Santander spokesman said: "Taking into account Mr Rowland's circumstances and the length of time he has been a customer, we have reviewed his case and are able to offer him a wider range of rates."

But David Hollingworth of London & Country, the broker, was less impressed. He said: "This is what borrowers hate about this come-and-talk-to-us approach. It smacks of under-the-counter deals. Whoever shouts loudest gets the best rates." Millions of mortgage prisoners are trapped on punitive interest rates, despite a strict order from regulators that captive customers must be treated fairly.

More than four million home owners face interest rates of up to 6pc when they come off their introductory deal and are switched to their lender's standard variable rate.

Since the financial crisis began most banks have imposed far stricter lending criteria, which require customers to have at least 20pc equity in their home if they want the most competitive fixed-rate or tracker mortgage deals.

Most banks now also assess an individual's earnings differently – and may not include bonus payments or overtime, for example. This can leave some people in the unenviable position of not being able to "afford" their current home loan, even though they may never have missed a mortgage repayment.

Those who find themselves caught in this trap have little option but to accept whatever deal their existing lender offers – and in many cases these are far from competitive.

But as one Telegraph reader found, these decisions can be successfully challenged. After intervention by The Sunday Telegraph his mortgage rate was cut from 5.8pc to 2.49pc – effectively halving his monthly mortgage payments.

This problem also affects borrowers whose personal circumstances have changed, or who find themselves with little or no equity in their property thanks to sliding house prices.

Latest figures from the Council of Mortgage Lenders suggest that 719,000 home owners are now in negative equity.

But while recent rulings from the Financial Services Authority (FSA) ordered lenders to treat these captive customers fairly, it appears that some are a lot "fairer" than others.

David Hollingworth of London & Country, the mortgage broker, said: "This is an enormous problem facing millions of borrowers. Some lenders are open about what new deals will be available to them when their current mortgage comes to an end. Others say, 'Come and talk to us and we will see what we can do,' which is all smoke and mirrors.

"No one knows whether what they are offered is better or worse than other borrowers and it is impossible to challenge, because the lenders do not publish the criteria they use to decide what rate they will offer any particular customer."

Ray Boulger of John Charcol, another broker, went further with his criticism. He claimed that the rate offered might have little to do with your creditworthiness, depending instead on how many other products you had with your lender.

"A lender may set the rate depending on how valuable a customer you are," Mr Boulger said. "This may have nothing to do with the way you manage your mortgage, or your credit profile, but whether you have a current account, Isa or other savings accounts with the same institution.

"We see clients who are excellent risks, and are stunned by the very poor rates offered to them at the end of their current deal. In some cases they are not offered an alternative to the standard variable rate at all."

Over the past year a number of lenders have raised their standard variable rates (SVRs) – despite Bank Rate remaining on hold for almost four years. The average SVR is now 4.88pc, according to Moneyfacts, although some are significantly higher. During this period the prices of fixed and discounted deals have fallen.

For example, Nottingham Building Society has an SVR of 5.99pc and home owners with a £100,000 repayment mortgage (over 25 years) paying the SVR would make monthly repayments of £644.

The same building society offers a five-year fixed-rate deal at 3.29pc, which would reduce monthly mortgage repayments to £489 – a £155 monthly saving. So even though borrowers would have to pay a £1,000 arrangement fee, they could save £1,860 in the first year, and more than £8,300 over the five years (or more if an interest rate rise pushes the SVR upwards).

But lenders such as Santander, whose SVR is 4.74pc, and KRBS, which has an SVR of 6.08pc, say they do not publish the rate given to existing borrowers, preferring to negotiate with them individually.

However, if your circumstances have not changed, the FSA has made it clear that your lender should not penalise you when you come to remortgage simply because it has altered its own lending rules.

An FSA spokesman said: "Where there has been no material change to a customer's circumstances and there is no increase to the loan size, lenders are not required to reassess affordability of existing borrowers."

Many lenders have also altered their stance on interest-only loans, making it almost impossible to remortgage unless you are prepared to convert your mortgage to a repayment basis, which can send the monthly bills soaring. For example, an £100,000 interest-only loan at 4.5pc costs £373. That rises to £556 if you switch to a 25-year repayment deal.

Nearly four million borrowers have interest-only loans, according to the Council of Mortgage Lenders.

The problem is particularly acute for older home owners, who cannot necessarily take out a new loan for 25 years. Someone a decade from retirement forced to switch to a 10-year repayment loan will see monthly bills nearly treble to £1,036.

Sticking with your existing lender is not a problem, provided that they follow the FSA guidelines and offer you "fair" options, rather than simply the SVR deal.

So what approach will your lender take when your deal comes to an end? Below we look at the options offered by Britain's largest lenders.

Halifax

Existing borrowers are offered a range of mortgages when they come to the end of their deals. These are not necessarily identical to those available to new borrowers, but as good as, and the rates are openly publicised.

For example, someone with at least 40pc equity can fix for two years at 3.2pc, or at 3.54pc if they have at least 25pc equity. These rates are in line with the fee-free deals available to new customers.

Halifax also offers those hit by falling equity the chance to fix their rate, but at a higher interest rate than SVR. For example, someone who needs to borrow 120pc of the value of their home can either stay on the 3.99pc SVR or fix for four years at 4.4pc.

Santander

The bank does not publicise deals for existing borrowers but asks customers to negotiate on an individual basis, and claims to tailor packages to each borrower's needs.

However, brokers say many borrowers are offered nothing, or rates that are not particularly attractive, unless they have other products from the bank.

Mr Boulger said: "I am convinced that the more products you have with Santander the better the rate you will get, although this is not openly publicised. We are very surprised by the poor rates we see clients coming to us having been offered. In some cases, excellent applicants are offered no alternative to the SVR at all."

Nationwide

Nationwide does not distinguish between new and existing borrowers when it comes to offering a new deal. All new borrower rates are available to all customers.

HSBC

Customers coming off deals have access to the same rates as new customers. A slightly better offer may be made to current account customers. A spokesman said: "Our approach is designed to help our own customers as much as possible. You can always open a current account at any time."

Woolwich/Barclays

Barclays' mortgage arm, Woolwich, offers the same rates to existing and new customers, with those coming off existing deals sometimes doing even better.

This is because many of them would otherwise automatically switch to a very cheap lifetime tracker anyway.

NatWest/Royal Bank of Scotland

Existing customers are offered similar and sometimes better deals than new applicants.

KRBS

Offers to existing customers coming off deals are negotiated in private, but the lender refused to be more specific. A spokesman said: "Our proposition is to offer tailored mortgages and any customers who meet product criteria when a specific deal matures are offered the opportunity to switch to a new mortgage."

Nottingham Building Society

The society proactively contacts borrowers approaching the end of introductory rates to offer them the chance to switch to new special deals. Only 5pc of its customers pay the SVR, according to the chief executive, David Marlow.